More than two-thirds of new cars (68.6%) registered last year fell into the sub-130 g/km threshold for £0 first year Vehicle Excise Duty leading to question marks about the tax’s future and possible reform as a means of generating government revenue.
However, the SMMT has warned that “this tremendous success” in cutting average new car CO2 emissions to 124.6 g/km raises questions about the future shape of taxation and incentives in the UK.
As a result, the SMMT commissioned the Centre for Economics and Business Research (CEBR) to consider the future role of Vehicle Excise Duty in the fabric of future UK fiscal policies on motoring.
To safeguard Vehicle Excise Duty revenue, the CEBR report recommends:
•A gradual evolution of bandings for cars, particularly segmentation of the current top band A. It recommends band A (currently up to 100 g/km) being segmented into three bands (0-50 g/km), 51-75 g/km and 76-100 g/km).
•The phasing in of a first year rate of Vehicle Excise Duty for cars in bands B, C and D (101-130 g/km), currently uncharged.
•Introduction of a new Vehicle Excise Duty for light commercial vehicles, which graduates by their CO2 emissions per tonne of loading capacity.